Page v. Clark

• Decision Date: 26 March 1979
• Docket Number: No. C-1407,C-1407
• Citation: 592 P.2d 792,197 Colo. 306
• Parties: P. E. PAGE, a/k/a Paul Page, Petitioner, v. Morton J. CLARK and Alice R. Clark, Respondents.
• Court: Colorado Supreme Court

Page 792

592 P.2d 792

197 Colo. 306

P. E. PAGE, a/k/a Paul Page, Petitioner, v. Morton J. CLARK and Alice R. Clark, Respondents.

No. C-1407.

Supreme Court of Colorado, En Banc.

March 26, 1979.

As Modified On Denial of Rehearing April 23, 1979.

Yegge, Hall & Evans, Michael D. White, Harvey W. Curtis, Wilkes McClave, III, Denver, for petitioner.

Dennis R. Frohlich, Boulder, for respondents.

ERICKSON, Justice.

Paul Page was the plaintiff in an action for unlawful detainer against the defendants, Morton and Alice Clark. He brought this action to terminate their tenancy in property on which they were residing and to gain possession of the property. The real property in question had been conveyed from the Clarks to Page in 1975 by means of a warranty deed absolute on its face. The Clarks answered, alleging that Page held the property for them as a constructive trustee and demanded that he convey the property to them. The constructive trust allegedly arose because at the time of the 1975 conveyance, Page had orally agreed to reconvey the property to the Clarks.

The trial court held that Page did not hold the land as a constructive trustee for the Clarks. The conveyance from the Clarks to Page of the real property was a sale in the opinion of the trial court. Therefore, the trial court ordered Page to pay the balance of the sale price to the Clarks upon the termination of their tenancy.

The court of appeals reversed. Page v. Clark, 40 Colo.App. 24, 572 P.2d 1214 (1977). We granted certiorari and now reverse the court of appeals and remand with directions for further proceedings not inconsistent with this opinion.

The court of appeals held that the trial court's finding that Page did not hold the property as constructive trustee for the Clarks did not mean that he could not be forced to reconvey the property to them. The court of appeals imposed an "equitable trust" upon the property and ordered Page to convey it to the Clarks.

I. Motion for New Trial

We concur in the court of appeals' determination that the Clarks' motion for new trial was timely filed.

II. The Facts

The Clarks were the owners of two adjoining parcels of land in Erie, Colorado. The east parcel was unimproved and unencumbered. The Clarks resided in a house on the west parcel. The west parcel was subject to a substantial encumbrance.

Page was the owner of an aircraft salvage business. He and Morton Clark developed a business relationship in which they would recover wrecked aircraft and store them, rent free, on the real property in issue. The Clarks also received calls relating to the business at their home and showed the aircraft to prospective customers. During the course of this relationship, the parties became friends.

In early 1975, the Clarks entered into negotiations to sell the east parcel to Page. Page wanted to purchase the east parcel to ensure that he would have a place to continue storing his salvaged aircraft. He also intended to improve that parcel, with an eye toward the future erection of a machine shop. On March 13, 1975, the Clarks conveyed the east parcel to Page by a warranty deed which did not reserve any interest in the property by the Clarks. The consideration for the sale of the east parcel was $1,000. The trial court found that, at the time of the sale, the parties orally agreed that the east parcel was to be reconveyed by Page to the Clarks "at such time as (Page) elected to sell and at such costs as he had incurred in purchasing and improving that property." The trial court also found that the reconveyance was to be made within a period of five years from the initial conveyance.

In September of 1974, the Clarks had begun to experience financial difficulties with regard to the west parcel and the house. Those difficulties continued until April 4, 1975, when they conveyed the west parcel to Page. That conveyance was also made by a warranty deed absolute on its face. The consideration was $17,000, which included Page's assumption of the first and second deeds of trust on the property, together with his pay-off of the accrued arrears on those deeds of trust. The trial court found that the conveyance of the west parcel and the house was accompanied by a second oral agreement to reconvey, similar to that which accompanied the first conveyance. In addition, the trial court found that when the parties consummated the sale of the west parcel, they entered into an oral collateral agreement that the Clarks could continue to occupy the house on the west parcel, rent-free, for so long as Page continued to hold title. The trial court further found that the total value of the property was $23,000. It also found that the consideration which was paid in the form of cash and the assumption of the mortgages was $18,000. The trial court valued the rent-free tenancy at $5,000.

The relationship between the parties became strained when the Clarks' son was killed in a boating accident which occurred while he was with Page. The relationship deteriorated further when the house on the west parcel was destroyed by fire in June of 1975.

On July 1, 1975, Page served the Clarks with a notice to quit the property. They refused, and on July 7, 1975, Page brought this action for unlawful detainer. The Clarks answered and alleged that Page held the subject property for them as a constructive trustee, by virtue of the oral agreements to reconvey described above. In the alternative, they alleged that Page had procured the property from them by fraud.

The trial court refused to impose a constructive trust upon Page for the benefit of the Clarks. ¹ It first found that the property had been purchased by Page for "good and sufficient consideration." There was admittedly a disparity of $5,000 between the $23,000 value of the land and the $18,000 purchase price. However, the trial court found that the oral agreement which allowed the Clarks to live in the house rent-free for five years constituted the remainder of the consideration for the sale.

The trial court also found that the business relationship between Page and Morton Clark was not a partnership. Instead, it characterized the transactions between them as that of employer and employee. Cf., Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928). The trial court further found that the sale of the property in question "was consummated as an arm's length transaction Without clear and convincing evidence of the existence of fraud, fiduciary relationship, partnership agreement, or other confidential relationship." (Emphasis supplied.)

Accordingly, the trial court held that, as there was no basis for the exercise of its equitable powers, the oral agreement to reconvey the east and west parcels to the Clarks was unenforceable because the parties to that agreement had not complied with the provisions of the statute of frauds, section 38-10-106, C.R.S.1973. ² See Griffith v. Sands, 84 Colo. 456, 271 P. 191 (1928). The trial court also found that there was not "clear and convincing evidence" that Page entered into the sale agreement with the intention of not fulfilling his promise to reconvey. It thus dismissed the claim that the property had been acquired by fraud.

However, the trial court found that the oral agreement which gave the Clarks a five-year, rent-free tenancy in the property was enforceable despite the provisions of section 38-10-106, C.R.S.1973, because of the "continuing performance of this agreement, together with (Page's) confirmation of this agreement during (his) testimony at trial." The trial court concluded that, since the relationship between the parties had deteriorated so markedly since the oral agreement relating to the tenancy was entered into, it would be unjust to require the parties to continue as landlord and tenant. In pursuit of an "equitable alternative," the trial court valued the tenancy at $5,000, and divided that figure by sixty months. It declared the resulting figure of $83.33 to be the monthly value of the tenancy, and ordered Page to pay to the Clarks the remaining $5,000 value of the purchase price for the property, subject to a reduction of $83.33 for each month's delay by the Clarks in terminating their tenancy.

III. Proceedings in the Court of Appeals

The trial court was reversed by the court of appeals. Page v. Clark, supra. In the course of its opinion, the court of appeals made a new finding of fact, overruled three findings of fact made by the trial court, did not follow the doctrines of resulting and constructive trust, and established a new equitable remedy, which it characterized as an "equitable trust," and imposed a new burden of proof by which courts are to determine whether to exercise their equitable powers. We reverse. These issues will be treated seriatim.

IV. Findings of Fact

The court of appeals made a new finding of fact on an issue not reached by the trial court. The court of appeals found that the Clarks had offered, before and during the trial, to reimburse Page for his costs in purchasing and improving the property. The testimony on this question was uncontradicted, and the finding is supported by the record. We do not reject this new finding which is an issue on appeal. See Westland Nursing Home, Inc. v. Benson, 33 Colo.App. 245, 517 P.2d 862 (1974).

The three trial court findings which were rejected by the court of appeals were: (1) that the oral agreement to reconvey the parcels was to take effect at such time as Page elected to sell; (2) that the oral agreement relating to the Clarks' rent-free tenancy was part of the consideration for the purchase of the west parcel; and (3) that:

"While (Page's) agreement with respect to the reconveyance of the property May have influenced the (Clarks') decision to sell in the first instance, and constituted a promise by the plaintiff concerning a future act, the evidence is insufficient to establish that the plaintiff's promise, when made, was coupled with a contemporaneous...